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Compal's Q2 profits down 35 percent

Compal Electronics Inc (仁寶電子), the world's second-biggest contract maker of notebook computers, reported a 35 percent drop in second-quarter profit yesterday because of seasonal factors, rising oil prices and China's efforts to cool down its economy.

The lower earnings were expected by analysts, who predicted that slowing demand in the period that ended June 30 would hurt Compal and its biggest rival, Quanta Computer Inc (廣達電腦), which plans to announce its figures later this month.

Compal -- which produces laptops for Dell Inc and other tech giants -- said net profit slipped to NT$1.69 billion (US$49.7 million).

The figures compare with a net profit of NT$2.61 billion in the second quarter of last year, a company statement said.

Intense pressure from clients for lower costs helped squeeze Com-pal's gross margin to 6.4 percent in the second quarter from 7.1 percent in the January to March period, the firm said. Business was also hurt by seasonal factors, higher oil prices and China's efforts to rein in its overheating economy, Compal said.

Mark Lo, an analyst at KGI Securities Co (中信證券), expected Quanta to also announce lower second-quarter profits.

"Slowing demand for laptop PCs was the main reason behind the falls in Quanta and Compal's net profits," Lo said.

Sluggish demand discouraged customers from farming out more orders during the second quarter.
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